corporatism

Expect WalMart to sue  

And the giant company would likely win a Nafta Chapter 11 suit against Vancouver 

by Kevin Potvin  

Observers of the WalMart-Vancouver City Council clash in late June might have missed an interesting side note to the drama. In the week before the vote was taken in the council chamber over whether to allow WalMart to build a store on Southeast Marine Drive, councilors were suddenly quiet on how they would vote and why. Pressed on their silence, one indicated that City-retained lawyers advised council members to not speak for fear of opening the door to litigation by WalMart.

What was left unsaid was the sort of litigation the City lawyers were anticipating. Normally, there wouldn’t be too many reasons beyond tact and strategy to be silent about such a contentious issue. Litigation over a decision of this nature has never before been raised as a fear. What has changed everything is Nafta, and in particular, that nasty bit of the agreement called Chapter 11.

Councilors declaring how they intend to vote and why is not what opens the City up to a Chapter 11 suit. But what they say could be used against the City in such a suit should it be pursued by WalMart, hence the lawyers’ warnings. What opens the City up to a suit in the first place is simply the act by Council of taking on the task of making such a decision about WalMart at all.

Chapter 11 states that a foreign company can sue a city or provincial government if it is disallowed from pursuing any business plan that is similar to other business plans the government has allowed other businesses, domestic or foreign, to pursue. For example, if the City allows me to operate a grocery store on one corner of an intersection, but disallows a company from the US from opening another grocery store on another corner for whatever reason, the US company may sue the City up to a value equal to what it can argue is a reasonable anticipation of profits. If that US company thinks it could have made $100,000 a year operating a store at its intended site, it can sue the City of Vancouver to compel it to pay $100,000 for every year it prevents that company from opening its store.

Chapter 11 is a key component of Nafta because it is the cornerstone of the neoliberal agenda to open up countries to all forms of direct foreign investment. By penalizing governments that might show favoritism to local companies, Chapter 11 ensures that foreign investors are treated exactly as domestic investors are treated.

The problem is, while domestic investors can be controlled in a variety of formal and informal ways, foreign investors in a globalized world working through giant companies cannot be controlled in any way. Local investors are typically smaller, their companies are smaller, and the leading officers of those companies are found in local communities. Many problems can be solved by the Mayor taking aside the president of a company at some party and explaining to him some problem and what might work as a solution. Or, failing that, the City might pass some by-law applicable to a particular address to solve a problem that won’t go away otherwise.

But when it’s somebody like WalMart, and the problem is millions of cars on local streets and whole business districts of the city threatened with bankruptcy, it’s a whole different kettle of fish. No longer may the Mayor quietly speak to the president about the problem. City of Vancouver’s revenue is 1 / 500 th the revenue of WalMart. Even that company’s profit alone is 17 times the whole City budget. The size of the City of Vancouver operation the mayor represents is smaller than a rounding off error in estimates of the size of Walmart’s operations. The company’s employees outnumber the total population of Vancouver by three times.

An effective management of most issues between the residents and the businesses of Vancouver could until now be mediated by a City Hall through formal or informal channels. But the federal government has now exposed municipalities and provincial governments to the full power of gigantic multinational companies. Former Prime Minister Brian Mulroney the Treasonous achieved this by slipping into the Nafta agreement the insidious Chapter 11.

WalMart can certainly sue the City of Vancouver because obviously local, Canadian big-box retailers have long been allowed to pursue profit in stores located in the same stretch of Southeast Marine Drive. Should it sue, its law team budget will be huge. Should it win, the profit it can anticipate annually at that one store will be enough to bankrupt the City of Vancouver. And it would probably win. We have the Conservative Party of Canada to thank for that.